PPP and nonlinearity of real exchange rates: new evidence from transition economies

摘要

In this article, we investigate the Purchasing Power Parity (PPP) concept by utilizing a database of monthly real exchange rates from 12 Central and Eastern European economies with respect to different numeraire currencies. Owing to the elaborated limitations of linear specifications by verifying this exchange rate theory, we apply a nonlinear unit root test based on the Exponential Smooth Transition Autoregressive (ESTAR) model proposed by Kapetanios et al. (KSS; 20034. Kapetanios, G., Shin, Y. and Snell, A. 2003. Testing for a unit root in the nonlinear STAR framework. Journal of Econometrics , 112: 359-79. [CrossRef], [Web of Science ®]View all references). Our analysis shows that after taking into account the nonlinear reversion of real exchange rates of European transition economies with respect to the euro, the validity of PPP is confirmed for the majority of countries in the sample.View full textDownload full textKeywordspurchasing power parity, nonlinear unit root test, stationarity, real exchange ratesJEL ClassificationC22, E31, F31, F40Related var addthis_config = { ui_cobrand: "Taylor & Francis Online", services_compact: "citeulike,netvibes,twitter,technorati,delicious,linkedin,facebook,stumbleupon,digg,google,more", pubid: "ra-4dff56cd6bb1830b" }; Add to shortlist Link Permalink http://dx.doi.org/10.1080/13504851.2012.667544